Trident Royalties (TRR.L) has released an update on the Mimbula copper project in Zambia, where it owns a 1.25% gross revenue royalty which decreases to 0.3% once an initial US$5M has been paid to Trident with a further decrease to 0.2% once 575,000 tonnes of copper have been produced. The nice bonus here are the minimum payments the private company which owns the Mimbula project has to make to Trident. In 2021, it had to pay US$1.5M while this increases to US$2M for this year and US$750,000 in each of the first two quarters of next year. To date, Trident has already received just over US$3M in advance payments which means Trident is already generating a nice return on its initial US$5M investment.
The advance minimum payments were well-structured as the project still hasn’t produced a single pound of copper (although the Trident update published on October 27 mentioned copper production was imminent). The operator of the mine has completed a bankable feasibility study to increase the annual production rate from 10,000 tonnes per year to 56,000 tonnes per year, supported by a total resource of in excess of 2 billion pounds of copper (just under 1 million tonnes) with an average grade of 0.97%.
This relatively high grade of the copper deposit means the production costs are low. The C1 cash cost is estimated at just over $1/pound after taking by-product credits into consideration. With production around the corner, it’s now very likely Trident will indeed receive all mandatory minimum cash payments by next summer.
Disclosure: The author has no position in Trident Royalties. Please read our disclaimer.